The governor of the State Bank of Pakistan (SBP) muffed growing international anxiety that Pakistan could not be able to make payments on its maturing international debt obligations.
SBP Governor Jameel Ahmed said, “Let me tell you that we will be honoring all our debt commitments on schedule and there should be no anxiety about that,” speaking to the Pakistan Stock Exchange (PSX) on Thursday.
Moody’s Investors Service and Fitch Ratings, two prominent international credit rating agencies, recently downgraded Pakistan’s credit rating due to concerns that the nation’s ability to repay its debts has weakened in the wake of the devastating floods, which caused the domestic economy to suffer losses of over $30 billion.
“Recently, the Asian Development Bank (ADB) loaned Pakistan $1.5 billion. The Asian Infrastructure Investment Bank (AIIB) and other multilateral and bilateral organizations are also anticipated to make more contributions soon, according to Ahmed.
He stated that “these inflows not only assist in meeting our debt obligations but also strengthen our foreign exchange reserves.”
On August 29, 2022, the International Monetary Fund (IMF) combined its seventh and eighth reviews of the economy and revived its $6.5 billion loan program for Pakistan, he recalled.
The country’s foreign exchange reserves are predicted to increase by 20% to a three-month high of approximately $9 billion with the receipt of ADB inflows of $1.5 billion, rebounding from the 40-month low hit at $7.6 billion on October 14, 2022.
Earlier this week, Pakistan’s risk of default, as determined by a 5-year credit default swap (CDS), surged to a 13-year high of 52.8%, up from less than 10% before the Covid-19 outbreak in Pakistan in February 2020.
The historical increase in default risk was a reflection of increased investor worry about timely debt re-payment on maturing debt on a worldwide scale.
Global investors have bought bonds (Eurobond and Sukuk) issued by Pakistan that are denominated in US dollars. On December 5, 2022, the nation is obligated to repay $1 billion against a maturing Sukuk.
Both current Finance Minister Ishaq Dar and his predecessor Miftah Ismail repeatedly guaranteed foreign investors that the nation would pay back its debt when the time came.
Since being chosen for a five-year term in August of 2022, this was the SBP governor’s first engagement in front of the public.